Relax. The Average Person Won’t Starve in Retirement

According to every study that makes the rounds, the average person is screwed come retirement age. More screwed than Jenna Haze’s average day at work.

(Edit: She’s been retired since 2012. Way to be up on the trends, Nelson)

They all point towards the same things. The average Canadian barely has two spare nickels to rub together at the best of times. They’re not putting any money towards a rainy day, never mind their golden years. The only reason why we keep getting richer is because the top 5% keep it going. Everyone else continues to struggle.

But here’s the interesting part. The average person has saved bugger all for retirement for decades now. Sure, many people used to be able to count on pensions, but it’s not like everyone who worked in the 60s had a gold-plated pension.

Enter Nelson’s friend

Let me tell you a story about a buddy of mine, a guy who retired about five years ago.

Despite only qualifying for a small pension from his long-time employer, he’s doing fine. Both he and his wife get CPP and OAS. They shoveled a little money into RRSPs over the years. Put all those income sources together and they earn about $30,000 a year. This is easily enough for them to live a relatively comfortable life.

Perhaps most importantly, they live a simple existence. Only one car is needed, since they spend the majority of their time at home. Fancy business casual clothes aren’t needed as an office wardrobe. There’s no need to put aside 10% of their income for retirement. Their tax bill is nonexistent.

Think about all the expenses a regular working Joe has. The government takes off anywhere from 20% to 50% of his pay for various deductions. Taxes make up a big percentage, of course, but so do CPP and EI. There are commuting costs as well as socializing after work. And somebody is always selling something for their kid. Hell, the cost of working can easily eat up a third of your salary. That’s bananas!

The cost of living goes down in retirement. It’s that simple.

Humans are smart

I’ve long been an advocate of working part-time during retirement. It allows you to do something productive, get out of the house, and, most importantly, will help stretch meager savings so they last longer.

Even if a retiree gets a shit-ass job making $15 per hour for 10 hours a week, that works out to $7,500 a year. Just about everyone can work 10 hours a week. Using the 4% withdrawal rate, that’s the equivalent of an additional $300,000 in retirement savings.

Too old to work a traditional job? No problem. The internet makes it incredibly easy to earn a little money while sitting on your ass. Or you can drive an Uber. By the time automation makes Uber drivers obsolete, you’ll be dead.

People have other levers they can pull too. Downsizing is going to become increasingly common over the next couple decades, especially in expensive markets. Single retirees can get roommates, or, gasp!, move in with their kids. My cheap small town sees a steady influx of retirees who like the laid back lifestyle, decent amenities, and, most importantly, inexpensive real estate.

Another possibility is a reverse mortgage, a type of loan that doesn’t require any immediate repayments. The amount of home equity you can borrow with such a loan is established using a loan calculator tool. Then you can receive that money to spend as you see fit with no immediate consequences. You only have to pay the loan back when you vacate the property. In the meantime, you will have the money you need to pay for essential expenses or enjoyable pastimes. If you leave the property, you can pay what you owe or let the home be sold.

Humans are smart creatures. They will find a way to survive. Sure, it might not be ideal, but are these options really that bad? Let’s put things into perspective here.

Fear from asset managers

Let’s face it. Many of these fears are hoisted upon us by the people in charge of managing our money. Of course they’re going to tell you to save more. They’re directly poised to benefit from this relationship.

It’s like asking your barber if you need a haircut. Which reminds me — I really need a haircut. I look like a hobo who’s intentionally trying to play the part.

Now don’t get me wrong. Saving for retirement is a good thing. I like knowing I’ll have options in my golden years. And there’s nothing that beats that feeling of security. Except orgasms, of course.

Us financial folk also have to realize we’re preaching to the choir a bit here. The average Financial Uproar reader already knows the benefit of saving for retirement. If anything, y’all are oversaving for your golden years.

Compare that to your friend who can barely keep themselves above zero. Getting them to go from struggling week-to-week to putting aside 15% of their income is going to be a big challenge. Some find the light and get reformed, but most don’t. They’ll struggle for their entire lives, yet somehow won’t starve.

Besides, if everyone invested, think about how expensive the stock market would be. I’d have to slit my wrists.

Exactly. There’s a huge difference between “I don’t have much savings” and “I leveraged myself to the hilt to make all of my non-sexual dreams come true.” The former can easily recover. The latter might be screwed.

Getting your house paid off is a major bonus. There aren’t many screwed retirees with a paid off house.

Hey Nelson!
Agree with you on the orgasms but as you get older you’ll find it is harder (excuse the pun) to get one everyday.
Aside from that it all depends on how you want to live. You and the old lady worked to get those two or three big screen TV’s, a couple of cars (maybe a toy car as well), nice super big 5-6 bedroom/bathroom finished basement game room house (with attached two (3?) car garage, cruise and a vacation every year plus restaurants and shows. How the hell are you going to afford all that on CPP/OAS? Even if you are both pulling them. Mind you, you were not just earning minimum wage to get all those luxuries of life and put the one or two kids through university.
So if you want to keep up that lifestyle, which is what those commercials show, you better have put one hell of a s**t load of money in to RRSP’s, TFSA and probably some unregistered accounts as well.
Having said that I know a couple just down the street from me who do quite well on the RRQ (CPP) and OAS. No company pension and I doubt they have that stash of money. They are not interested in fancy vacations. Their vacation is going hunting or fishing and enjoying live together at home. Hell, even their vacations put food on the table. One might say the vacations almost pay for themselves.
All that to say that it depends on what you want above the necessities of life. I know I would not be happy to sit on the front porch in a rocker and watch the cars drive by but I do not need (read want) all that much more than something to put a smile on my face every now and then. Now where are those little blue pills.

I agree, I see this every day with my coworkers too. Downsizing is basically how most are relying on having significant cash on hand the day they retire.

One thing you forgot to mention is that by the time they retire they’ll have no mortgage. Most of my colleagues who don’t want to leave their homes on retirement are just planning to pay their debts off, which will offset the decrease in income. Since the average Canadian buys too much house, paying off their monster mortgage would go a lot further than your readers may realize.

I especially agree with your last paragraph. If everyone started living like personal finance nerds tomorrow, so many industries would totally collapse within days.

first i would like to say i really don’t appreciate the language you use in getting your point across. you can do better.

what you have stated is great for a younger people who have started a pension fund or have a company pension to use. even those in their 40s have a good chance of a decent retirement, provided they actually start a program.

you, and you’re not alone, do not talk about seniors on the other side of retirement issue. what about the others who don’t have such luxuries or had to cash in their RRSPs to pay the bills and now have nothing.

in a recent global tv report about retirement (links below) they said if you invest early in life you’re great. however, for those of us who are now in our 60s and having to start all over again it’s not so easy.

my wife and I will will have to work until at least 73 before considering retirement. we will need $60K per year each and put most of it away, if possible in order to make a dint in retirement. we dont want to become one of those 70+ seniors that collect bottles beccause they have no money to live on. Nor do we want to have a part time job to make ends meet, especially being a walmart greeter.

the only good news is that the CPP is separate from the government and will continue to be strong for another 75 years. it is also recommended that the feds go to a guarrenteed income program, now, in order for all seniors to be able to live comfortably.

We’ve been seeing studies that claim seniors are screwed come retirement for decades now. Yet these folks aren’t starving in the streets. Sure, they might have to watch their pennies (like my buddy), but they’re hardly screwed.

As for your own personal situation, I’m betting there are plenty of things you could do today to push up that retirement age. Ever consider downsizing? Moving to a place cheaper than Calgary? Cutting back your lifestyle? I certainly don’t know much about you based on one internet comment, but I’m willing to guess there are options you haven’t considered. After all, you poo-pooed getting a part-time job pretty quickly.

Hell, I am retired and still pick up bottles and cans. I even found a penny the other day. Trouble is I may not be able to spend it since inflation hit by 500%. You can no longer be in for a penny as it will take at least a nickel. I am over joyed when I find a US penny as I can spend that at least.
As to down sizing, you still have to live someplace. So you were smart and paid off that mortgage several years ago. Now you and the missus are empty nesters and still in reasonably good shape (no blue pill yet). Personally I could downsize quite easily. Trouble is that it would cost me more to rent than it costs me to maintain and pay the bills in my paid off house. It is a give and take on that one. Some cyphering to do to figure out if the funds from the sale are invested will they pay for the new digs. Personal call on that one.